Daily Flows & Commentary BY THE CURVE TEAM –

Daily Flow & Insights – More Central Banks Hike, Employment Data Strong

Friday, 17th June, 2022

Daily Flows

  • Judo Bank attracted notable funding yesterday after their TD rate lift – particularly in the 3m space at 2.25%.
  • A domestic BBB+ name saw steady flows around the 1-year level, gathering some momentum at 4.15% for 13 month funds.
  • Numerous FRN lines have been available across the curve at attractive relative values. Major bank lines around the 1-year term are trading around +55, while shorter options such as the Feb 2023 BOQ FRN were trading at +69. Fixed options have been more limited this week and have been a little trickier given the recent market volatility.

BoE Overshadowed By Swiss National Bank

  • The BoE raised their cash by 25 basis points to 1.25% overnight.
  • Inflation is now 9.00% YoY in England, driven by exuberant energy prices.
  • The move may have been more subdued than expected, given other central banks are making 50 points the norm, but could largely be driving by the last GDP read, which came out negative.
  • However, this rate hike was overshadowed by the Swiss National Bank, who hiked their cash rate by 50 basis points.
  • The Swiss National Bank were not on the radar as they have not changed the cash rate since 2007.
  • Inflation is now at 2.90% in Switzerland (a number most central banks are envious of), but have decided to get ahead of the curve and address inflation immediately.
  • The cash rate still remains at -0.25%, but the move serves as a great indicator of inflation woes around the world.

Australian Employment Strong

  • Yesterday, Australia’s employment data was released. It saw the unemployment rate remain at 3.90% but the reason behind this was significant.
  • 60,000 new jobs were created in the month of May, with the participation rate moving substantially from 66.4% to 66.7%.
  • The unemployment rate didn’t fall for this reason, as the increase in jobs was offset by a slight increase in unemployed people.
  • Importantly, underemployment fell from 6.10% to 5.70%, meaning that skilled workers are falling into the correct jobs.
  • The strength of the Australian labour market is another indication of the resilience of the economy.

Lawrence Vosper, Nicholas Allan

Curve Team